If you have huge student loans, you’re probably waiting for information on the Biden administration’s plan to alleviate a significant portion of that financial load through student loans forgiveness. President Biden promised to erase $10,000 in student loans for most middle-class borrowers and up to $20,000. This is because more than 45 million Americans owe more than $1.6 trillion in federal student loans. The formal application for student loan forgiveness is available on the Federal Student Aid website. But, there are still obstacles to Biden’s strategy. A federal appeals court temporarily halted the plan on Oct. 21 2022 in response to a lawsuit filed by Republican leaders in six states.
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How to apply for student loans forgiveness
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The Biden administration is providing widespread loan cancellation to qualified borrowers, and the procedure may be automatic for some. Unless the Education Department already has your income information, you will need to fill out an application to have your debts forgiven. The Department of Education has commenced the application, so borrowers can start applying now. As for how to apply for student loans forgiveness? The application is short, very easy to complete, and doesn’t require your Federal Student Aid (FSA) ID or any supporting documents. However, note that the application deadline is December 31, 2023.
When filling out the form, you have to type in:
- Your full name
- Social Security number
- Date of birth
- Phone number
Before applying, you must input your electronic signature and tick a box verifying that the information you gave was true “under penalty of perjury.” The software is available in two languages: English and Español. Submitting it indicates that you are applying for loan forgiveness, that you fulfill the income and other qualifying standards, and that you will provide proof of income by March 31, 2024, if needed. Borrowers should receive loan forgiveness within four to six weeks of applying. If you apply by November 15, for example, you could get your loan forgiven by the end of the year.
Are defaulters eligible for student loans forgiveness?
If you were in default on your student loans prior to the emergency forbearance (i.e., you missed payments for 270 days or more), you may still be eligible for forgiveness. The government has stopped collections on defaulted student loans in recent years. The Education Department said in April 2022 that defaulted loans will enter current repayment status after the moratorium expires. Borrowers will have access to federal protections and will be able to restart their defaulted loans.
What type of student loans are eligible for forgiveness
Student loans forgiveness is only available for federal student loans from the Direct loan program that were outsourced before June 30, 2022. Qualifying loans include
- Direct subsidized and unsubsidized loans,
- Grad Plus loans,
- Parent Plus loans and
- Consolidation loans.
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Other changes to federal loan asides loan forgiveness
- Extension of the emergency forbearance
The emergency forbearance was first implemented in March 2020 in response to the Covid-19 epidemic, and it has subsequently been extended multiple times. The government extended the emergency waiver until the end of 2022. Borrowers have not had to make payments on their federal student loans for several years, and interest has been suspended at 0%. However, borrowers should expect to start paying in 2023.
- Plans for a new income-driven repayment plan
The administration revealed plans to create a new income-driven repayment, or IDR, scheme in addition to prolonging the student loan freeze. Borrowers currently have four income-driven plan options:
- Income-Based Repayment
- Pay As You Earn
- Revised Pay As You Earn
- Income-Contingent Repayment
- IDR plans
If you have student loans on one of the existing income-driven repayment plans, you may need to recertify your income in the coming months. IDR plans place your monthly student loan payments on your family size and income and require annual renewal. Recertifying your income and family size takes less than 10 minutes and can be done online at the Federal Student Aid website. However, you must present proof of your income in the form of legal papers such as tax records.
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How to prepare for student loan repayment and relief?
- Fill out the application for up to $20,000 in student loan forgiveness on the Federal Student Aid website.
- After filling that, it’s a good idea to sign into your Federal Student Aid account and review your loans
- Passwords do expire, so check if yours is active or needs to be reset.
- After logging in, check how much you owe, who your student loan servicer is and what your interest rates are.
- Check if you received a Pell Grant in college, which could qualify you for an additional $10,000 in loan forgiveness.
- Make sure to update your contact information, so you don’t miss any important information.
- You may also sign up for the Department of Education’s newsletter to get notifications about any developments to the program.
If you still have a balance after receiving loan forgiveness, review your options for repayment prior to the new year. The Federal Student Aid Loan Simulator tool can help you review your loans on different repayment plans and choose one that fits your budget. You can also consider forbearance and deferment, both of which pause payments temporarily. Forbearance is usually granted for 12 months at a time, while deferment times can vary but may last for up to three years. Keep in mind that your loans may accrue interest if you pause payments through these programs, causing your loan balance to increase.
